Important terms for Budget
Indian Budget 2021 -Visualize some Highlights
Important components in Budget
Revenue Budget
It consists of the Revenue Expenditure and Revenue Receipts.
Revenue Receipts
- Receipts which do not have a direct impact on the assets and liabilities of the government.
- It consists of the money earned by the government through
- Tax such as excise duty, income tax
- Non-tax sources such as dividend income, profits, interest receipts.
Revenue Expenditure
- It is the expenditure by the government which does not impact its assets or liabilities.
- For example, this includes salaries, interest payments, pension, and administrative expenses.
Capital Budget
It includes the Capital Receipts and Capital Expenditure.
Capital Receipts
- They indicate the receipts which lead to a decrease in assets or an increase in liabilities of the government.
- It consists of:
- The money earned by selling assets (or disinvestment) such as shares of public enterprises, and
- The money received in the form of borrowings or repayment of loans by states.
Capital expenditure
- It is used to create assets or to reduce liabilities.
- It consists of:
- The long-term investments by the government on creating assets such as roads and hospitals
- The money given by the government in the form of loans to states or repayment of its borrowings.
Balanced, Surplus and Deficit Budget
Balanced Budget
- A government Budget is assumed to be balanced if the expected expenditure is equal to the anticipated receipts for a fiscal year.
- Expenditure = Receipts
Surplus Budget
- A Budget is said to be surplus when the expected revenues surpass the estimated expenditure for a particular business year.
- Here, the Budget becomes surplus, when taxes imposed, are higher than the expenses.
- Expenditure < Receipts
Deficit Budget
- A Budget is in deficit if the expenditure surpasses the revenue for a designated year.
- Expenditure > Receipts
Different Government Deficit
Revenue Deficit
- It refers to the excess of government’s revenue expenditure over revenue receipts.
- Revenue Deficit = Revenue expenditure – Revenue receipts
- The revenue Deficit includes only such transactions that affect the current income and expenditure of the government.
- When the government incurs a revenue deficit, it implies that
- The government is dis-saving
- Government is using up the savings of the other sectors of the economy to finance a part of its consumption expenditure.
Fiscal Deficit
- It is the gap between the government’s expenditure requirements and its receipts.
- This equals the money the government needs to borrow during the year.
- A surplus arises if receipts are more than expenditure.
- Fiscal Deficit = Total expenditure – (Revenue receipts + Non-debt creating capital receipts).
- It indicates the total borrowing requirements of the government from all sources.
- From the financing side:
- Gross fiscal deficit = Net borrowing at home + Borrowing from RBI + Borrowing from abroad
- The gross fiscal deficit is a key variable in judging
- the financial health of the public sector
- the stability of the economy.
Primary Deficit
- Primary deficit equals fiscal deficit minus interest payments.
- This indicates the gap between the government’s expenditure requirements and its receipts, (not taking into account the expenditure incurred on interest payments on loans taken during the previous years).
- Primary deficit = Fiscal deficit – Interest payments
Types of Budgets
Zero Based Budgeting
- It is a method of budgeting in which all expenses are evaluated each time a Budget is made and expenses must be justified for each new period.
- Zero budgeting starts from the zero base and every function of the government is analysed for its needs and cost.
- Budget is then made based on the needs.
Outcome Budget
- It analyses the progress of each ministry and department and what the respected ministry has done with its Budget outlay.
- It measures the development outcomes of all government programs.
- It was first introduced in the year 2005.
Gender Budgeting
- It is gender-based assessment of Budgets, incorporating a gender perspective at all levels of the budgetary process.
- It comprises of restructuring revenues and expenditures in order to promote gender equality.
- It is actually budgeting for gender equity.
- Through Gender Budget, the Government declares an amount to be spent over the
- Development, Welfare, Empowerment schemes and programmes for Females.
Other important terms in News
Off-budget borrowing
Off-budget borrowings are loans that are taken not by the Centre directly but by
another public institution which borrows on the directions of the central government.
Such borrowings are used to fulfil the government’s expenditure needs.
Since the liability of the loan is not formally on the Centre, the loan is not included in the national fiscal deficit.
This helps keep the country’s fiscal deficit within acceptable limits.
